A self managed super fund can provide you much greater control over your superannuation assets – and potentially higher returns as a result.
However managing a self managed super fund can be a time consuming and complicated process. Here are the answers to common questions surrounding self managed super funds.
What is a self managed super fund?
A self managed super fund is a private superannuation fund where self managed super fund members manage the fund themselves. The advantage for members is a much higher level of control it tailor their fund (including investment choices) to best meet their individual needs. A self managed superannuation fund can be created for one to four people.
There is no rule or minimum requirement on the value of a superannuation needed to set up a self managed super fund. There are a number of costs involved for the creation of the fund and annual running costs including:
- Investment-related expenses
- Legal and tax advice
- Auditing costs
- Australian taxation office supervisory levy
Self managed super funds are established for the sole purpose of providing financial benefits to members in retirement and their beneficiaries. While controlled by the trustees, all self managed super fund investments are made in the name of the fund.
There are two trustee options; corporate trustees and individual trustees.
- Where a company acts as the trustee and each member is a director
- Each member is appointed as a trustee with a minimum of two trustees required. Each member of the fund must be a trustee.
These trustees have a number of responsibilities including:
- Making investment decisions and ensuring implementation of an investment strategy for their fund
- Maintaining records, providing financial statements, completing tax returns and organising an independent audit
What are the risks involved with a self managed super fund?
In the case of fraud, you may not have access to compensation that apply to larger super funds. As a result, you could lose a substantial amount of your fund.
Members of self managed super funds do not have access to the Superannuation Complaints Tribunal. This is a way that members of other funds can resolve disputes. It can be costly and time consuming if legal action is required to resolve disputes.
A self managed super fund can be can be a costly exercise:
- The costs involved in establishing a self managed super fund are not tax deductible
- Life and disability insurance cover can be more difficult or expensive to get with a self managed super fund
The operation and compliance with a range of important duties and rules is your responsibility. Consequently, significant penalties may apply if you do not meet these requirements.
A future change in circumstances (e.g. bankruptcy, relationship breakdown, loss of mental capacity, reduced superannuation balance) could mean that costs may apply. Therefore, it is important to have an exit strategy planned for this future risk.
Who regulates self managed super funds?
The primary regulator of SMSFs is the Australian Tax Office, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).
Whilst there are some complexities to be considered in setting up a self managed super fund, it can be a rewarding decision and in recent years there has been significant growth in self managed superannuation for just that reason. Come and talk to us to ensure it is the right decision for you.